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Back To Buying New Lows In The Australian Dollar

|Includes:CurrencyShares Australian Dollar Trust ETF (FXA)

You can read my last article on the Australian Dollar here. In that article I explained how I now felt that instead of just buying new lows in the Aussie, you could start buying dips as well. Unfortunately, the rally that started a couple weeks ago has fizzled out and I am back to buying new lows in the September Australian Dollar again. I bought last week as we dipped to a new low of .9105 and after taking profits on a rally to .9200, I was back buying again this morning when we dipped to a new low of .9092. Again, I will be buying every time the currency price drops 50 points. Being a nice big round number, I feel a bottom should occur as we approach .9000. I am looking for a bounce of 300 to 400 points when we bottom.

Bearish sentiment remains at extremes and there are record short positions registered by large speculators. It appears to be a perfect setup for a contrarian investor like myself who likes to go against the grain and reject the consensus opinion. Everyone who wanted to get short should now be short so a large short covering rally can occur out of nowhere at any time. Buying new lows has worked since the Aussie traded down to .9850 and as we dip lower and lower, the strategy should work even better since there is a tendency to find support and bounce the lower prices we trade. One of these dips into new lows will be the ultimate bottom. The over reaction to Bernanke's comments last week should exhaust itself after 4 or 5 days of trading so by midweek things should improve in both the Aussie and in gold.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: FXA